West Palm Beach Bankruptcy Specialists

Credit Card Interest and Finance Rates

Credit card debt represents a large portion of America’s owed monies. Many Americans have put a considerable amount of money onto their credit card, sometimes even exceeding the credit limit. The kicker, though, is that many credit card holders assume that if they just continue to pay the minimum payment each month, they will eventually pay it off.

The truth of the matter is: you will eventually pay it off in a very long time. For most companies the minimum payment covers only 2-3% of the actual balance. A large majority of that payment is taken as an interest charge or a finance charge. Understanding how this is calculated may help you better understand how the card works.

In general, the interest rate for the year is determined at the contract signing. Potential holders must be aware that these rates may change on a conditional basis. Being on time every month is a key part of keeping those rates low.

On top of the interest rate, banks like to add a finance charge to the balance. This is done in a variety of different ways and generally depends upon the institution. The four most common ways are through adjusted balance, average daily balance, the two-cycle average daily balance, the previous balance, and the ending balance.

The best way to find out is by calling your banking institution or paying close attention to your billing statement. Not knowing about credit card debt will only lead you blindly to a worse financial situation. If you are in over your head, bankruptcy might be an option. Contact the West Palm Beach bankruptcy specialists of the Eric N. Klein law firm by calling 561-353-2800.